Fran O'Sullivan: China trade high on Key-Gillard agendas

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PM's challenge is to build on gains already made under FTA

John Key and Julia Gillard will be glad to step away from respective domestic headaches for the Boao forum. Photo / Greg Bowker
John Key and Julia Gillard will be glad to step away from respective domestic headaches for the Boao forum. Photo / Greg Bowker

John Key has booked a drink with Julia Gillard during the weekend's Boao forum on Hainan island where they are joining 11 other leaders on Chinese president Xi Jinping's dance card.

It will be an important - and welcome - outing for both Australasian leaders. A chance to strut their stuff on the international stage and get away from the political heat at home.

Gillard's leadership has been under pressure. No one serious expects her to survive the September general election in Australia. Key isn't facing an election this year but his own image has been tarnished as a result of the latest "brain fade" episode; his forgetfulness over the machinations leading up to Ian Fletcher's appointment as head of the GCSB.

It's not surprising that they want to share a drink. Probably more than one, too.

In the grand scheme of things the Fletcher affair is small-beer stuff. It's pertinent to note that former GCSB chief Bruce Ferguson, who went on the attack against Key this week, was not on the initial short list for one of his earlier roles.

He jumped over arguably higher qualified players when he was made Chief of the Defence Forces under Helen Clark's reign.

While the travelling media will keep the pressure up on Key on domestic issues, the coverage will be balanced by other more positive news generated by his mission.

Tomorrow Key and Gillard get just six minutes to demonstrate to Xi - and the Chinese power-brokers who will be present - the importance of their countries as economic partners to China.

Key doesn't want to waste these pressure minutes by too much homage-making to Xi. He's hosted Xi to dinner twice before and is a known quantity unlike some of the other newer leaders.

New Zealand and Australia have been huge beneficiaries of Chinese global demand. NZIER labels China as New Zealand's "hottest export market" and according to new figures says it eased the pain of the global financial crisis by taking $4.9 billion of NZ's additional $9.5 billion exports since 2007.

The free trade deal that New Zealand notched with China on April 7, 2008 provided this country with a competitive edge - particularly for agricultural trade with 96 per cent of NZ exports duty free by 2019.

But those FTA preferences will not last forever. And there are signs that Australia - which has yet to cement its own FTA - is on the verge of getting full RMB convertibility for the Aussie dollar. This would be of enormous benefit to Australian exporters - but does not appear to be on NZ's agenda.

If it is not on the agenda for this week's high-level talks in Beijing, how can Key get it elevated so Australia (assuming the leaks are on the money) does not steal a march on our exporters.

Tomorrow Key is expected to flesh out further a developing strategy for New Zealand to pony up with Chinese capital to invest in third markets - particularly in the agriculture area - and develop high quality proteins for China's growing middle class. It is an important positioning statement which follows on from a similar theme played out in Latin America which is an obvious target for co-investment.

Key and Gillard will make state visits to China next week to celebrate the 40th anniversary of diplomatic relations with China for both New Zealand and Australia.

Key's visit comes at a crowded time in Beijing's official agenda.

He is one of 13 foreign leaders or heads of international organisations who will attend the Boao Forum. The others are Brunei's Sultan Hassanal Bolkiah, Kazakhstan president Nursultan Nazarbayev, Burma's President U Thein Sein, Peruvian President Ollanta Humala Tasso, Zambian President Michael Sata, Finnish President Sauli Niinisto, Mexican President Enrique Pena Nieto, Cambodian Prime Minister Hun Sen, Ms Gillard, ; Algeria's Speaker of the Council of the Nation Abdelkader Bensalah, Chairman of the State Great Hural of Mongolia Zandaakhuu Enkhbold and the president of the United Nations 67th General Assembly session, Vuk Jeremic.

Nine of those leaders will also make full state visits as guests of Xi. Key, Hun Sen and Gillard will make official visits as guests of Chinese Premier Li Keqiang.

Over this weekend, Key will have the usual round of meetings with other leaders such as Gillard, Pena Nieto and Tass, and potentially influential meetings with IMF managing director Christine Lagarde and Microsoft founder Bill Gates.

The agenda for Key's visit is set, but not all the outcomes are set in stone. His challenge is to read the signals during the week and use his position to cut through in areas where New Zealand is not making progress. How the FTA looks following his meeting

Premier Li Keqiang will be the test.

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

Read more by Fran O'Sullivan

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